Factor Reallocation in Eastern Germany after Reunification

摘要

Fifteen years after reunification, the economy of the former East Germany is on the mend. Industrial production excluding construction has expanded by more than 60 percent since 1995 and by 28 percent since 2000, compared with only about 4 percent in West Germany, for the latter period. Real GDP has grown 3.5 percent per year since 1991 and 8.2 percent annually in the manufacturing industry alone. More than half of the measured labor productivity gap and more than a third of the GDP per capita gap between East and West have been closed, in considerably less time than predicted by Robert J. Barro (1991). As Table 1 shows, convergence has been impressive on a wide array of indicators, although it has slowed in recent years and remains most difficult in the labor market.